I'm finally a "mean landlord"

[Dave Poeppelmeier]

This post is for the new and newer Investors out there. When we start out as Investors, most of us want to be the great landlord we never had: one that fixes everything quickly, who is super nice, and wants to make life supremely enjoyable for our residents. We want to make the world a better place! When we have 1, 2, 3 rentals, we can easily do that. But guess what happens as we continue to grow: the Law of Large Numbers starts to rear it's ugly head, for better and for worse.

As we continue to rent our houses and units out over time, we are going to be interacting with many new people. These people you will not be able to get to know as well, because you have 10 houses now and not 2. You have your screening procedures in place, but you let someone in that almost meets your criteria. They have a great story about getting back on their feet, they love the house, they want the school district, etc. You have now encountered the Professional Resident. The resident that know all of the rules of the leasing game, what you as an Owner can and can't do, and actively seek to be a pain in the rear. You are getting maintenance calls every week, some legitimate, some not, some they caused on purpose. Rent is late, they almost pay all of it, but it's not too much of a balance. Before you realize it, rent has stopped coming in, they are not responding to communication, and now you start the eviction process, which in places like CA and NY, is darn near impossible to get someone to leave. 

You ask yourself "what happened???" You realize that you were too nice. Next time, you're going to stick to your screening procedures! That goes well for a while, but then you buy another house with residents living there, and a week before closing they give their 30-day notice to vacate. No problem, they said they'll be out at the end of next month. The end of the month comes and one person has moved out, but the other needs a few more days to get their work to relocate them out of town. Sure, no problem, just pay the prorated rent when you move out and that will work out fine. The only problem, is now that resident has let his brother come stay with him for a few days, and now he thinks he's renting the place and won't leave. You now have a squatter! Guess what you get to do? Go through the eviction process because he knows you can't simply call the police for trespassing, he as stuff there! He's living there, has a key, and says see you in court. 

Yes, both of these situations happened to me, along with many others along the way. Most of us want to be generally nice to people, believe in the Golden Rule/Karma/Law of Attraction/etc. Unfortunately, there are a lot of people out there that don't play by those rules. There are people that will take advantage of any little thing they can get their hands on, including your benevolence. Looking back at all of the situations I've been involved in, it's because I deviated from solid rental business practices in the name of "being nice" and "trying to help someone out". 

Now, should we be the Landlords from Hell that are all over our residents for every little thing they seemingly do and assume everyone is out to get us? Of course not. That would be bad ju-ju for sure. We can (and should) be genuinely nice and polite, and provide good service as property owners. But we have to do so in the space of our lease and the law, and no further. Fortunately, I'm big enough now that I have Property Management to handle all of this, but if I were starting over or managing my portfolio for myself, I would be "mean". By that I mean operating to the letter of the lease all the time. If they are late with their rent, they are late with their rent and they pay the late fee. If I'm sure they (or their kids) did something to the property, they are liable. Or, if they are going to be able to pay rent on the 6th instead of the 5th, put everything IN WRITING via letter/email/text, and if they don't follow through, charge them the late fee. 

It's tempting and easy to let things slide and be the "nice guy/gal" to avoid conflict. Don't do it. If you can't do that: do NOT manage your own properties. You will pay more money getting taken advantage of than you're going to pay for a good property manager. There are hundreds of articles and threads on here about how to find a good PM so I won't bore you with that. 

Bottom line: This is YOUR business, and you need to look out for YOU first. Outside of your rent and maintenance of the property, your residents don't owe you anything, nor do you owe them anything beyond your owner responsibilities, But, if you do your job right, the right people will tell others about you, especially in small towns or markets like Student Housing. I hope this helps, and please drop other instances where you were "too nice" and how it turned out. Good luck!

[Nathan Gesner]

Good share, @Dave Poeppelmeier!

I don't have any big horror stories because I started out managing for others and always took it seriously (though I have made mistakes).

I do have a lot of horror stories. In fact, the majority of Landlords that I manage for were the kind of Landlords that thought their generosity towards Tenants would result in well-behaved, long-term tenants. It almost never works out. I don't have hard numbers, but it's certainly higher than 80%. Examples:

• My own father-in-law believed Tenants would take better care of his property and pay on time if he treated them generously. He kept rent below market rates, gave his tenants the month of December for free as a Christmas present, never charged late fees, and would accept every sob story sold to him. He had five properties when he passed away and I took over management. Between those five, four of the tenants were evicted after my father-in-law had lost about $40,000 over the past two years.
• Landlord asked for help with a non-paying renter. I immediately recognized the tenant's name because we had rejected their application the year before. They paid one month of rent, skipped a month, then negotiated paying 50% for a year with the promise of catching up after that. They stopped paying any rent after a few more months. The property as so trashed that I called Family Services and the children were removed immediately. Floating $hit in four inches of sewage and they had built a path with boards so the kids could get to their beds. That's not an exaggeration. Between unpaid rent/utilities and damages to the home, the Landlord lost $30,000 in one year. I later took over management of four more properties for her and she had lost tens of thousands on each one.
• Little old lady calls because she thinks her renter is "not being honest" about the situation. Four months of not paying rent or utilities. Every time the Landlord complains, Tenant writes a long letter explaining all her problems and asking for a little more time because she "found a new job that starts tomorrow". A quick review of the Tenants facebook page shows that her only "job" is selling marijuana, smoking it, and asking people to party with her. $12,000 in losses.

I have dozens of these stories. No good deed goes unpunished. If you operate with the belief that people are generally good and they will appreciate generosity, you will fail in this business. It's why grocers and gas stations do not let people keep a tab.